A high-performing bank has bankers who understand both credit and industry-specific drivers, enabling them to better understand the prospect or client. These bankers are equipped to both protect and strategically grow the bank’s assets. To that end, I often had to digest and synthesize large amounts of information to close deals during my 23-year commercial and corporate banking career. On top of that, I had to be an expert in hundreds of different industries, which is also no easy task.
For bankers, industry-related information developed with a sound credit foundation is an essential and valuable resource. When a banker understands the prospect’s industry and also knows credit, they are well-positioned to understand a business owner’s unique situation. The key, in my experience, is to have access to what you might call “the right stuff”: industry insights delivered in the way a banker wants and needs them.
Let’s face it: Most lenders don’t need to see 50 random ratios on a screen. They simply require the key ratios that steer credit decisions, presented in a logical flow — data like leverage, current ratio, quick ratio, historical and projected industry growth rates, GPM and OPM, cash flow margins, and turn days. This is “the right stuff” you need to know — the core drivers that best cover the financial condition of a company (balance sheet), operating performance (income statement), cash flow analysis, and cash cycle analytics.
The importance of gaining industry insights
During my early years as a commercial banker, my industry research usually revolved around a series of industry reference tools and web searches. Often, this meant time spent searching in a random fashion, gathering somewhat related information using a choppy, inconsistent process.
Yet despite the clumsiness of my search approach, even back then, I knew that reviewing industry information was important. Why? Because in order to fully know and understand the core operations of the prospect we are targeting or our client’s company, we need to be experts in their industry. And to become industry experts, we need a tool that provides “the right stuff” — overviews and granular detail in an easy-to-navigate, fluid layout — and we need the foundation of this information to be rooted in credit.
Credit analysis requires industry knowledge
In the simplest terms, credit is analyzing a bank’s ability to be repaid. I often hear bankers talk about how they “sell money,” but in reality, commercial bankers do not sell money; we rent money. We let a company use our capital for a period of time — and then we need it back. Being able to quickly understand what the credit profile of a company within a certain industry should look like results in better credit decisions.
Vertical IQ fully understands the importance of credit, and they know how to provide bankers with “the right stuff” to make well-informed decisions about a prospective deal. That’s why continuous credit assessments of key credit decision drivers — including industry risks, assets banks lend on, financial ratios, and valuations, to name a few — are woven directly into their Industry Intelligence.
With Vertical IQ, it’s easy for the credit analyst and commercial banker to seamlessly extract relevant credit-based industry information to strengthen their credit summaries, operating performance and financial condition analysis, and, of course, their cash flow analysis (which is the bank’s primary source of repayment).
In my experience, it is great to have great industry information. But access to such information can turn into frustration, wasted time, and more work when an analyst has to sift through pages and pages of information to get to the relevant material. Analysts and commercial bankers are busy. They need industry information quickly, and it has to be relevant. That is where quickly and easily getting “the right stuff” via Vertical IQ comes in.
Vertical IQ’s Industry Intelligence is “the right stuff”
Vertical IQ is like having a 25-year commercial banker at your side — someone who has expertise in the exact industry you are navigating. Their timely, relevant Industry Intelligence provides the industry- and credit-driving information that bankers base their decisions on, such as:
- The structure and size of companies within the industry
- The leading companies within the industry
- How companies in the industry operate
- Industry trends
- Core industry terminology
- Credit and underwriting risks
- Industry outlook for predicting the future
- Working capital asset and fixed asset analysis (as these are the assets the banks are lending on)
- Business valuations
- Financial benchmarks to compare your prospect and client to industry peers
…and so much more!
Accurate, industry-specific data is the driving force when analyzing credit. For instance, a company’s leverage may seem moderately high at 5:1, but when that analysis is compared to the industry average of 5.5:1, the comparison provides the necessary depth and context for an accurate banking decision on that company’s credit-worthiness.
What’s more, Vertical IQ’s Financial Comparison Tool makes it nearly effortless to compare your client’s or prospect’s company to their industry peers in a side-by-side analysis. Then, with just a click, you can easily export the comparison with comments into your credit analysis.
Ending where I started, bankers have a lot of data to sift through and manage. But Vertical IQ gives them “the right stuff” — the easy-to-access, relevant data needed to make the best decisions for the bank as well as for the business owner. Vertical IQ’s Industry Intelligence is simple to navigate, relevant, and looks like it was put together by a well-seasoned commercial banker — because it was.
Check it out for yourself with a free demo to learn why I choose Vertical IQ Industry Intelligence as my source for Credit Training, Inc.’s industry research.
About David Nicholson, Founder, Credit Training, Inc.
David Nicholson had been in commercial banking for more than 20 years. Since 1997, David has analyzed and structured deals for hundreds of companies ranging from large corporate publicly traded companies to smaller middle market deals. David has been teaching credit for over 10 years and started teaching formal C&I credit training in 2015.
Learn more at www.credittraininginc.com.